Senate Bill 1049 - PERS Legislative Changes
Overview
This bill was passed and signed into law in order to reform PERS. This bill contains five major components that combined are expected to reduce system-wide employer contribution rates by 5.43% and reduce employer contributions by 1.2 to 1.8 billion a biennium beginning with the 2021-23 biennium.
Summary of Changes - Benefit Modifications
Individual Account Program (IAP) Redirect - EFFECTIVE JULY 1, 2020
Redirects a portion of the 6% monthly contribution to a newly established Employee Pension Stability Account (EPSA) when monthly salary is above the salary threshold:
- For Tier One/Two members, 3.5% to IAP and 2.5% to EPSA
- OPSRP members, 5.25% to IAP and .75% to EPSA
Redirected funds to the EPSA will be applied to partially fund the member's pension benefit at retirement. This change remains in effect until PERS is 90% funded at which time the total 6% contribution would go back to the IAP account. This change only applies to contributions made after July 1, 2020.
Members have an option to make additional after-tax contributions, through payroll deduction, in the redirected amount into their IAP by completing the PERS IAP Voluntary Contribution Election through the Online Member System (OMS), find a step-by-step guide here. Only members who are subject to the redirect can make these additional after-tax contributions, and only the exact redirected amount (2.5% for Tier 1 and Tier 2 or 0.75% for OPSRP) can be made through this voluntary contribution election.
Change in Final Average Salary Limit - EFFECTIVE JANUARY 1, 2020
Caps annual salary at $195,000 for all purposes, including final average salary and employer contributions.
- For Tier One/Two, limit will impact pension benefits determined under the Full Formula or Formula Plus Annuity calculation methods; will not impact Money Match calculation method
- For OPSRP, limit will impact pension calculation
Change in Work After Retirement Limits - EFFECTIVE JANUARY 1, 2020
If you retire on or after the normal retirement age for your retirement tier, there are no limitations on the number of hours you can work in a post-retirement appointment. Hour limitations still apply if you choose to retire early. Currently, Tier One/Two members who are under their full Social Security age have an hour limit of 1039/calendar year, and OPSRP members at any point in retirement have an hour limit of 600/calendar year.
Employers who choose to employ a PERS retiree will still be required to make retirement contributions, which will not impact the retiree's PERS benefits. Rather, contributions on retirees will be used to cover the Unfunded Actuarial Liability (UAL). This remains in effect calendar years 2020 until at least 2024.
Change in IAP Target-Date Funds - EFFECTIVE FALL 2020 (IN ADVANCE OF JANUARY 2021 MEMBER CHOICE)
By Fall 2020, PERS will inform members of an "optional investment choice window," in which the member can choose a Target-Date Fund for IAP investments, different from the default fund based on the member's birth year. IAP funds are currently invested in Target-Date Funds based on the member's birth year. Beginning in 2021, members may choose a fund that is more reflective of the member's risk tolerance, as opposed to the default based on age.
Summary of Benefit Changes - System Financing Modifications
Tier One/Two Unfunded Actuarial Liability (UAL) Amortization - EFFECTIVE UPON PASSAGE OF BILL
- Reamortization of UAL payment to 22 years as opposed to 16 years
- One-time change to lower payments to the UAL for the upcoming biennium
- no effect on member benefits
